Nickel hits new high above $40,000By Anna Stablum LONDON, Feb 21...

Nickel hits new high above $40,000
By Anna Stablum

LONDON, Feb 21 (Reuters) - London Metal Exchange nickel traded above the key psychological level of $40,000 per tonne on Wednesday as tight warehouse supplies dwindled further.

Tin also set a new high in early trade and held gains, but by midsession other metals had drifted lower on profit-taking.

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"For the moment it (the market) is extremely tight and no one wants to short nickel right now," analyst Jon Bergtheil at JP Morgan said.

In early trade, nickel hit a fresh high of $40,250 and was at $39,480 at midsession versus Tuesday's $39,900.

"The market is very nervous -- many prefer to step aside when the price is just looking to go higher, making the market even more volatile," an LME floor trader said.

The price has risen by 20 percent since the start of the year on top of gains of 150 percent in 2006.

"Nickel has broken $40,000 and nothing has changed -- there is a very severe shortage of nickel," another LME trader said.

Analyst Michael Widmer at Calyon said in a report nickel consumption would remain high and limited supply was coming through, so prices should remain well above their historic average.

However, prices might correct from current highs towards the end of the first quarter due to a deceleration in the growth rate of stainless steel output, Widmer said.

Stainless demand accounts for about two-thirds of total nickel offtake.

Available nickel stocks in LME warehouses fell to 2,064 tonnes, or just over half a day of world consumption.

Volumes were thin as the Shanghai Futures Exchange is closed for Lunar New Year from February 17, re-opening on February 26